Double AN-ACC increase, says StewartBrown

StewartBrown is calling for the Australian National Aged Care Classification price to be increased to at least $310.91 per resident per day to ensure funding levels meet the rise in costs of operating an aged care home.

That’s $15.21 and 5.17 per cent more than the current AN-ACC price and just over double what the government announced as the incoming base. As announced earlier this month, from 1 October, the base AN-ACC price will increase to $303.19 – 2.55 per cent or $7.55 more – than the current price of $295.64.

In a discussion paper published on Monday, the aged care financial benchmarking company echoed sector concern that the increase is an “effective cut in operating margins,” given the consumer price index of 3.8 per cent for the year to July 2026 and the national wage decision mandating a 4.75 per cent increase from 1 July 2026.

Meanwhile, average direct care costs – including the allocation of administration overheads – have increased 9.5 per cent in the nine months to March 2026 compared to financial year 2025, according to StewartBrown’s latest financial report.

StewartBrown said it strongly believed the AN-ACC price should include a margin to support:

• investment in innovation
• staffing above 3-star average levels
• varied service delivery models
• providers of different sizes
• regional considerations
• community expectations
• regulatory requirements for high-quality care.

The financial viability of residential aged care homes in Australia is already “a significant issue at current funding levels,” StewartBrown noted – with 62 per cent of aged care homes operating at a loss. StewartBrown also warned that the percentage will likely increase for the full financial year 2027 and increase further should the AN-ACC price not be increased further than 2.55 per cent.

While the Independent Health and Aged Care Pricing Authority’s methodology for calculating the AN-ACC price is consistent with previous years and is based on indexing a cost base for known changes in wages and non-labour inflation, StewartBrown said IHACPA is relying on FY24 data, which no longer reflects the current operating environment.

StewartBrown’s recommendation that the AN-ACC price be increased to at least $310.91 follows IHACPA’s indexation methodology but uses cost data from the March 2026 quarter-to-date cost base – the first standalone quarter of data with a cost base associated with the new Aged Care Act and strengthened Aged Care Quality Standards (see below).

In its discussion paper, StewartBrown also pointed to recommendation 3b xix from the royal commission, which stated that an underlying principle of the new Aged Care Act should be that “the Australian government will fund the aged care system at the level necessary to deliver high quality and safe aged care and ensure the aged care system’s sustainability, resilience and endurance.”

“The proposed AN-ACC price from 1 October 2026 does not hold to that principle nor does it foster an environment of financial sustainability,” StewartBrown said.

Hotelling supplement also needs a boost

StewartBrown is also urging the government to increase the hotelling supplement from $22.15 to at least $27.96 per day so that homes that do not offer higher everyday living fee services can recover the cost of providing everyday living services.

While acknowledging that it is difficult to identify the costs of providing additional and extra services separately to the core costs of providing everyday living services, StewartBrown said that there is only 38 cents difference between the cost base of “all homes” and the homes not charging for additional services – based on data shown in table 32 of the 2026-27 Pricing Advice technical specification paper.

“The absence of a gap in the ‘all homes’ average is primarily due to the inclusion of additional and extra services revenue, which StewartBrown considers should be excluded from the calculation,” it said.

“Using IHACPA’s own assessment of that gap based on homes not charging for additional or extra services would lead to an increase in the hotelling supplement of $5.81 per bed per day. Based on StewartBrown’s March 2026 survey, the gap for standalone quarter for this group is $8.52 per bed per day. For the nine months to March the gap for this group was $11.18 per bed per day but that included a period prior to the increase in the hotelling supplement to its current level of $22.15.”

An increased hotelling supplement would allow any revenue from additional services to provide a return or margin on those services, rather than merely offsetting the care cost gap, StewartBrown said.

IHACPA should consider a loading based on regionality

StewartBrown has also called for IHACPA to consider a loading of the hotelling supplement based on regionality, noting that even based on its current methodology of calculating the gap, the amount of revenue received in regions outside major population centres is lower, so the revenue and cost gap is greater.

Based on it’s March 2026 survey, StewartBrown said regional homes are “clearly not recovering the full cost of providing everyday living services under current operating conditions, even where some homes charge additional or extra services fees.”

Instead, a regional top-up supplement or location-based loading should be considered. But StewartBrown said it does not consider that any additional supplement should be means tested, as it would see regional residents contribute more towards the hotelling supplement than residents in major metropolitan locations.

“StewartBrown recommends that the government and IHACPA review how the hotelling supplement is calculated and paid with particular focus on regionality and consider incorporating a loading/top-up supplement to recognise the increased cost base and reduced ability to charge the same level of fees for additional or extra services (now HELF) as those providers in the major population centres,” it said.

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